In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial firms affects the stability of a cartel of strict profit-maximizing firms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of firms. By appropriately selecting the dimension of the fringe, a policy maker can affect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign firms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.[JEL Classification: D43; L13; L21]

Dragone D. (2007). Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion. BASINSTOKE : Palgrave Macmillan [10.1057/9780230274334].

Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion

DRAGONE, DAVIDE
2007

Abstract

In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial firms affects the stability of a cartel of strict profit-maximizing firms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of firms. By appropriately selecting the dimension of the fringe, a policy maker can affect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign firms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.[JEL Classification: D43; L13; L21]
2007
Firms' Objectives and Internal Organisation in a Global Economy: Positive and Normative Analysis
85
113
Dragone D. (2007). Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion. BASINSTOKE : Palgrave Macmillan [10.1057/9780230274334].
Dragone D.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/109365
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